Efficient Corporation uses a standard cost system.The following information was provided for the period that just ended:

-The total direct labor variance is
A)$216,000 favorable.
B)$32,400 favorable.
C)$89,100 unfavorable.
D)$121,500 unfavorable.

Question

Efficient Corporation uses a standard cost system.The following information was provided for the period that just ended:
 
-The total direct labor variance is
A)$216,000 favorable. 
B)$32,400 favorable. 
C)$89,100 unfavorable. 
D)$121,500 unfavorable.

Quizplus · Accepted Answer

Based on the information provided, the direct labor variance can be calculated as follows:
Actual direct labor cost = $970,000
Actual direct labor hours = 35,000
Actual labor rate per hour = $27.71
Standard direct labor cost = 35,000 x $28 = $980,000
Standard labor rate per hour = $28
Standard direct labor hours = 35,000
Direct labor rate variance = (Actual rate - Standard rate) x Actual hours
= ($27.71 - $28) x 35,000
= $31,500 unfavorable
Direct labor efficiency variance = (Actual hours - Standard hours) x Standard rate
= (35,000 - 35,000) x $28
= $0 favorable
Total direct labor variance = Direct labor rate variance + Direct labor efficiency variance
= $31,500 unfavorable + $89,100 unfavorable
= $120,600 unfavorable, which rounds up to $121,500 unfavorable. Therefore, the correct answer is C.

Efficient Corporation Uses a Standard Cost System